Fonterra today released details of its $500 million public
offer, which will be by far the biggest issue to hit the NZX
this year when it lists on November 30.
The offer will allow non-farm investors access to the
cooperative dairy giant's dividend flow.
Units in the Fonterra Shareholders Fund will be pitched
between $4.60 and $5.50 a unit, according to offer documents
released by the dairy cooperative today.
The final price will be announced on November 27, following
the completion of an auction-style book building process.
There will be no public pool.
There are two main components to the scheme - the Fonterra
Shareholders' Market and the Fonterra Shareholders' Fund.
The shareholders' market will be available only to farmers to
trade their shares among themselves, while the shareholders'
fund will be open to both farmers and the investing public.
The fund, which will operate along similar lines to a unit
trust, is expected to be worth not less than $500m.
In the book build, selected institutional investors will be
invited to lodge bids indicating the number of units they
wish to apply for. The final price could be above the
indicative range, Fonterra said.
Fonterra has forecast a dividend for the 2013 year of 32
cents a share. The indicative price range implies a gross
dividend distribution yield of 5.8 per cent to 7 per cent.
"It is important to note that this is an opportunity to
invest in units issued by the Fonterra Shareholders Fund, and
not an opportunity to acquire Fonterra shares," fund chairman
John Shewan said. "However, the return on a unit is
essentially dependent on the performance of Fonterra."
In the offer documents, Fonterra forecast earnings before
interest and tax of $1.079 billion for 2012-13, up from
$1.028b in the 2011-12 year. The cooperative forecasts a net
profit for the period of $690m, up from $624m in 2011-12, and
a dividend of 32c, unchanged.
The offer to subscribe for units in the fund is expected to
open on November 5.
The offer comprises $500m of units, with the ability to
accept oversubscriptions of a further $25m. Fonterra said
there was no offer to the general public.
From November 2, farmer shareholders will have the
opportunity to sell to the fund economic rights of up to 25
per cent of "wet" shares - shares that farmers are required
to hold to meet the the share standard for a season, and any
"dry" shares - those held in excess of the requirement.
If economic rights offered by farmer shareholders are less
than the minimum size of the fund, Fonterra will issue shares
to make up the shortfall but Fonterra said it did not intend
to permanently retain the resulting equity.
Chairman Sir Henry van der Heyden said that for the first
time in Fonterra's history, members of the public would be
able to gain exposure to New Zealand's biggest company.
He said the fund would support liquidity in the Fonterra
Shareholders Market, allowing farmer shareholders to trade
Fonterra shares among themselves with a more flexible
structure, rather than buying and redeeming them through the
"This will provide permanent capital for Fonterra and reduce
redemption risk, while preserving 100 per cent farmer control
and ownership of the cooperative," van der Heyden said in a
"It is an historic day for the cooperative. The fund provides
a unique opportunity for the public to gain exposure to the
financial performance of Fonterra and the global dairy
- Jamie Gray, APNZ business reporter